All 23 Cash Application questions
More in Cash Application
What is a lockbox and how does it help cash application? How are returned/NSF customer payments handled after they were applied? How is customer credit balance or prepayment handled in AR? How are bank fees and card-processing fees on receipts accounted for? What is straight-through cash application and what blocks it? How does cash application affect the accuracy of collections activity? How are early-payment (settlement) discounts taken by customers recorded? How do you apply a single payment across multiple invoices with partial amounts and deductions? How does cash application interact with the bank reconciliation? What KPIs measure cash application performance?
Advertisement
Accounts Payable & Receivable › Cash Application

What is a suspense account and how is it used in cash application?

Intermediate

Answer

A suspense (holding) account temporarily holds transactions that can't yet be classified—like unidentified receipts—until they're resolved. It keeps the books balanced while research proceeds, but should be cleared promptly; a growing suspense balance signals unresolved items and control weakness.
Unidentified receipt 2,000:
  Dr Bank 2,000  Cr Suspense 2,000
On identification: Dr Suspense 2,000  Cr AR 2,000
Real-world example An unidentified wire parks in suspense until the customer confirms the invoices, then it's applied and suspense cleared.

Common follow-ups: Why must suspense be cleared quickly? | What does a rising suspense balance indicate?

Reconciliations Aging Analysis Cash Application
All 23 Cash Application questions